The Australian housing market has grown increasingly expensive, with prices rising faster than wages. As a result, this has made it difficult for many Aussies to buy a home and has increased rental costs.
So, how could these declining values impact your mortgage when the cost of living and interest rates are rising?
In this article, we will go through the crisis that Australia's housing market is facing and its impact on you as a mortgage holder.
The Australian Financial Review reports that prices for homes and apartments have decreased over the previous three months in 2,404 markets, representing a dip in roughly 80% of Australian areas. This number is almost double the amount recorded during the last quarter.
New data from CoreLogic also shows that all areas in Sydney, Melbourne, Canberra, and Hobart that were reviewed experienced a decline in values during the third quarter, with Hobart being the only city to have a quarterly decline in all unit markets. ( source: mpamag )
The market tool record shows that 79.5% of house and unit markets analysed saw values retreat over the September quarter.
Eliza Owen, head of research at CoreLogic, stated that price reductions would probably grow even more in the December quarter because borrowers are still paying higher interest rates.
There's no doubt that renting is also getting more expensive in Australia.
In fact, recent data from CoreLogic show that over the last 12 months, the average rent for a house has climbed by 4.3%. Not only that, but the cost of renting an apartment has also increased by 3.7%.(source: interest.co.nz)
Moreover, in PopTrack's Market Insight Report, properties were available for less than $400 last month, which is the fastest rate of decline in the nation for the affordable rental market in Melbourne.
So what does this mean for renters? Well, it's becoming more and more challenging to find affordable rental properties. And if you're already renting, you probably have to pay extra weekly just to keep a roof over your head.
Of course, this isn't good news for anyone looking to rent a property in Australia. But it's tough for those on a low or fixed income and families with children.
If you're currently renting, there are a few things you can do to try and keep your costs down.
Remember that you're not the only one battling to keep up with Australia's growing rent prices. That's why asking for assistance from a respectable lender or mortgage broker is one of the things you may do to try to lessen the financial stress.
As property values continue to decline around Australia and interest rates rise, many borrowers find themselves stuck in their present mortgages with no way out.
According to NAB predictions, the median house price in Sydney could decrease by more than $175,000 by the end of 2023, while it could decrease by more than $156,000 in Melbourne. (source: 9news)
This can be a rough ride, as it might put first-time homeowners with smaller down payments in a problematic situation known as a mortgage prison.
Mortgage Prison is a term used when you can no longer afford your mortgage payments, and you're stuck in your home because the value of your property has declined so much that you owe more than it's worth.
Various reasons can lead a borrower to become stuck in their current loan, such as if the value of their house decreases, interest rates increase, or income changes.
So, how can you avoid getting trapped in a mortgage prison? Or if you're trapped, what can you do?
Peter White, director of the Finance Brokers Association of Australia, recommended that seeking financial advise from a mortgage broker and getting the best guidance will give you a better outcome.